Do you need a Lifestyle Spending Account?

August 8

Lifestyle Spending Accounts are becoming all the rage as the new, hot flex benefit on the block of employee offerings. Similar to Healthcare Spending Accounts, where a certain amount of money is allocated per employee to cover health-related expenses that aren’t included under traditional benefits, Lifestyle Spending Accounts give employees a specific amount of flexibility to cover a laundry list of non-health related expenses. For this reason they are often referred to as a Flexible Spending Accounts, or FSA. This can provide funds for both health and wellness products or services, is a taxable benefit for employees and allows you, the employer, to only pay for the amount that is actually claimed.

With a Healthcare Spending Account, employees have the ability to claim a medical expense that isn’t covered — for example, the additional cost above the eligible amount for new prescription glasses or the use of nitrous oxide (laughing gas) for dental extractions. An FSA on the other hand, covers almost anything that falls into the health and wellness category, such as gym memberships, sports equipment, fitness classes or life coaching.

Sounds like a great offering, right? But here’s the trouble with it.

With the first, a needed health expense (i.e. glasses) is topped up or a much-appreciated health expense is covered (i.e. laughing gas). Without the Healthcare Spending Account, an employee may choose a cheaper pair of glasses that fits within the claimable amount or choose to forego the sedation during a dental procedure. But with an FSA the covered expenses are likely something the employee would have purchased anyway. In other words, will an employee avoid buying new running shoes simply because there isn’t money available to cover the cost?

We’re guessing probably not.

For the typical employee, a Lifestyle Spending Account ends up falling into this scenario: “Oh, it’s almost the end of the year and I haven’t yet spent that money! Quick, where’s the receipt for the new hockey skates and gear that I bought my kid 6 months ago?”

That’s the thing about Lifestyle Spending Accounts; they don’t encourage actual lifestyle changes, which should be the goal of wellness benefits. Instead, they simply encourage someone to ‘get their money back’ on an expense that they willingly paid for in the first place. An employee who wants a gym membership, and who values the lifestyle benefit of working out at a gym, will pay for that membership and visit often. An employee who doesn’t enjoy going to the gym is unlikely to be encouraged to join one simply because the membership fee is covered by this benefit. The Lifestyle Spending Account doesn’t necessarily inspire employees to do something that they wouldn’t normally do.

If your underlying objective in investing in employees is to create behaviour change, the better way to do so is to invest in fundamental education that inspires action.

Because being able to claim a new pair of running shoes is useless to the health and wellness of an employee if the employee was encouraged to buy the shoes because they were claimable but hates running and instead leaves them sitting in a closet to collect dust.

Want to know how we inspire our employees to wear their running shoes? Ask us about Tracksuit Tuesdays.

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